· The Japanese yen and Swiss franc retreated on Thursday as the United States and Iran backed away from further conflict, with markets flipping back to the old habit of more risk-taking on hope of a U.S.-China trade deal.
The dollar traded at 109.19 yen JPY=, jumping back sharply from a three-month low of 107.65 yen touched on Wednesday.
The dollar rose to 0.9740 franc CHF= from Wednesday's low of 0.96655 while the euro firmed to 1.0828 franc EURCHF=R from 21-month low of 1.07825 set on Wednesday.
· “The targets Iran chose to attack do not seem to be of major importance. Nor does there seem to be any casualties on the U.S. side,” said Kazushige Kaida, head of foreign exchange at State Street.
“So markets have interpreted the attack as mainly for Iran’s domestic audience. U.S. public opinion also does not support a war with Iran. So for people like us, short-term traders, the lesson from yesterday was that you can make money by taking advantage of knee-jerk market reactions from news headlines and markets could become more risk-tolerant,” he said.
The euro traded at $1.1116 EUR=, flirting with its lowest prices in almost two weeks, not helped by weak German industrial orders data.
· According to Karen Jones, analyst at Commerzbank, EUR/USD sold off yesterday and there is scope to extend its decline to the 100 day ma at 1.1065, but we should see some stabilisation between here and the 3 month uptrend at 1.1050.
Key Quotes
“Initial support is the 55 day ma at 1.1094. Overhead the market is facing tough resistance at 1.1197-1.1240 – namely the 55 week ma, the 2019-2020 down channel and the recent high. This guards the 200 week ma at 1.1360 which continues to represent a critical break point medium term.”
“Failure at the uptrend would target the 1.0981 29th November low.”
· China’s Vice Premier Liu He, head of the country’s negotiation team in Sino-U.S. trade talks, will sign a “Phase 1” deal in Washington next week, the commerce ministry said on Thursday.
Liu will visit Washington on Jan. 13-15, said Gao Feng, spokesman at the commerce ministry.
Negotiating teams from both sides remain in close communication on the particular arrangements of the signing, Gao told reporters at a regular briefing.
· A U.S. congressional report released on Wednesday called for sanctions against China over human rights abuses, and for U.S. officials to keep rights concerns in mind during dealings with Beijing, including trade negotiations.
The annual human rights report from the Congressional-Executive Commission on China said human rights and rule of law conditions worsened in China from August 2018 to August 2019, the period studied.
China’s foreign ministry said on Thursday that a U.S. Congressional report that called for sanctions against Beijing over human rights abuses was neither objective nor credible.
The United States should reflect upon its human rights situation at home and stop smearing China, ministry spokesman Geng Shuang said at a daily news briefing in Beijing.
· US in a letter to UN says it stands ready to engage in serious negotiations with Iran
Reuters cites a letter presented at the United Nations (UN), in which the US justifies the killing of Iranian Quds Force Commander Qassem Soleimani as self-defense.
The US tells UN it is prepared to take additional action in Middle East 'as necessary' to protect US personnel, interests and it stands 'ready to engage without preconditions in serious negotiations with Iran' to prevent escalation by Tehran.
The market mood remains calm following the risk-on sentiment that ensued, in response to US President Trump’s de-escalating address over the US-Iran conflict. The above headlines fail to boost the market sentiment, as USD/JPY holds the higher ground near 109.20 while the US Treasury yields drop back into the red.
· Japanese Prime Minister Shinzo Abe on Thursday expressed support for a decision by the United States to make a measured response to Iranian missiles strikes on U.S. troops in Iraq.
"Japan has been urging all parties involved to exercise self-restraint so it's our stance that we support the restrained response (by the United States)," Abe told reporters at his office.
· China’s consumer inflation steadied while factory-gate prices fell at a slower pace in December, giving Beijing room to stay the course on monetary easing as economic growth cools.
Some investors have worried that consumer inflation, hovering near eight-year highs, could make China’s central bank more cautious about further stimulus.
China’s consumer prices in December rose 4.5% from a year earlier, National Bureau of Statistics (NBS) data showed on Thursday, unchanged from November’s pace, but lower than analysts’ forecast of 4.7%. The gains were again fueled by a surge in pork prices as African swine fever ravaged the country’s hog herds.
· China’s central bank said on Thursday that it has signed a currency agreement with Laos, allowing direct local currency settlement for transactions under the current and capital accounts.
· Oil prices steadied on Thursday a day after tumbling on concerns raised by an Iranian missile strike on Iraqi bases hosting U.S. forces.
Brent crude futures were down 5 cents at $65.40 a barrel by 0728 GMT after a 4.1% fall on Wednesday.
West Texas Intermediate futures were up 1 cent to $59.63 a barrel after falling nearly 5% a day earlier.
· WTI holds steady below $60bbls, focus on OPEC+ cuts
Oil prices plunged on Wednesday, with only a modest rebound in recent trade following reports of rockets hitting Green Zone in Baghdad. Oil was reversing the spike in yesterday's Asia trading after US President Donald Trump downplayed Iran's missile attack against US forces in Iraq.
Oil Price Analysis: WTI tumbles to $60 a barrel
The crude oil West Texas Intermediate (WTI) is strongly rejecting the 65 handle while trading above the main SMAs.
Black gold is having a sharp selloff to $60 a barrel and the 200 SMA on the four-hour chart. As the bears took control the market is more likely to continue to explore lower prices towards 57 and 55.50 price levels. Resistances are seen near 61, 62 and 63 handles.
Reference: Reuters, FX Street, CNBC
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